Russia’s problems threaten European automakers

With a dwindling demand for new cars, a falling currency and now the geopolitical troubles brought by the Crimean crisis, Russia’s threat of additional economic measures could hit automakers like Ford or Opel.

Just as the carmakers are starting to recover from the six-year long European economic crisis, Russia’s problems – which was set to overcome Germany as the region’s biggest auto market – which started last year, are threatening their evolution.

“The problem with Russia is that it’s a polarized market,” said Philippe Houchois, an analyst for UBS. “There’s the high end and the low end, and not much in between.”

Ford announced at the beginning of the month its decided to cut 950 jobs at two of its three joint venture plants in Russia, but also reiterated its forecast to break even in Europe by 2015 and then return to profitability.

For Opel, meanwhile, the problem is more serious – General Motors decided to integrate the Russian auto unit under the GM Europe since the start of 2014 – which means any failings in the market would reflect on its full European revenue.

According to the Moscow-based Association of European Businesses, GM sells Opel, Chevrolet and Cadillac in Russia and had a market share of 9.3% in 2013, while Chevrolet is the No.1 US brand in the country. Still, the sales of Chevrolet models fell in 2013 a lot steeper than the overall decline – 15% to just 5%.